Category: Investing

True Bogleheads know the power of diversification. And yet, many such investors (including John Bogle himself!) are reluctant to diversify beyond domestic investments. Japanese investors could have perceived the same thing, with a remarkable run in the 80s in terms of market capitalization (nearly half of the world, higher than the US at some point) and in terms of stock returns. Unfortunately for Japan, as discussed in a previous blog article, this impressive success was followed by the worst equity crisis in modern history. This study about Japan also showed how some level of international diversification would have helped a local investor to mitigate this extremely painful crisis.
This raised an interesting question. Could one simply invest in the world, using global stocks and global bonds? And if this proves unsatisfying, is there a proper middle ground between domestic and global allocations?

Portfolio Losses and Volatility Volatility, the constant change in a stock fund or portfolio value, is normal and cannot be avoided. None the less, it scares people, or to be more accurate, downside volatility scares people, while upside volatility makes …

Understanding Stock Volatility Read More »

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Investors have the tendency to invest in markets as they perform well, and disinvest as they perform poorly. This pattern extends to the stock, bond, and money markets.

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Once an investor develops a reasonable plan for long-term investment, a vital component to its success is for the investor stay the course and stick to the plan. This is perhaps the most challenging part of long-term investing.

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Investors are exposed to a never-ending stream of newsprint articles, media talking heads, and internet chat  filled with prognostications and auguries that now is the time to buy or sell a specific stock; or now is time to jump in …

The evidence against market timing Read More »

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As we begin our lifelong investing “career” we must recognize the risks inherent in investing. A primary risk for investors accumulating the funds for their retirement years is that they fail to accumulate a nest egg that can outpace the …

Stock and bond market return and risk Read More »

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A key investment principle is the need to diversify one’s investments. This principle harkens back to the proverbial “don’t put all your eggs in one basket.” As an example, consider an individual employed by Microsoft who holds an investment portfolio …

Diversifying investments Read More »

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John Bogle, in his speech, “Investing With Simplicity,” states:“Simplicity is the master-key to financial success. When there are multiple solutions to a problem, choose the simplest one.” Simplicity can take on a number of forms in the art of investing. …

Simplicity Read More »

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Keeping investment costs low is a vital investment principle. Investment expenses come directly from your investment return, and over the long-term eat into your wealth accumulation. Expenses are one aspect of investing that you can control, so understanding the various costs …

The advantages of keeping investment costs low Read More »

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Once you have adopted a sound financial lifestyle you can begin the process of accumulating financial wealth. As you begin to invest your savings a second principle comes into play:  invest early and often, for two important reasons: In order …

The advantages of investing early and often Read More »

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